Onzm & Anor v Watson & Ors [2017] EWHC 256 (Ch)

Case No HC- 2015-001647[2017] EWHC 256 (Ch)IN THE HIGH COURT OF JUSTICECHANCERYVenue Royal Courts of Justice, Strand, London, WC2A 2LLDate 16/02/2017
Before
MR JUSTICE NUGEE
Between
SIR OWEN GEORGE GLENN KNZM ONZMClaimantKEA INVESTMENTS LIMITEDClaimantERIC JOHN WATSONDefendantNOVATRUST LIMITEDDefendantMILES JOHN ANTHONY LEAHYDefendantNUCOPIA PARTNERS LIMITEDDefendant(5) SPARTAN CAPITAL LIMITEDDefendantClaim No: 3224/2015IN THE HIGH COURT OF JUSTICECHANCERY DIVISIONCOMPANIES COURTIN THE MATTER OF SPARTAN CAPITAL LIMITEDAND IN THE MATTER OF THE INSOLVANCY ACT 1986KEA INVESTMENTS LIMITED Petitioner-and-
Between
NOVATRUST LIMITED( 2) SPARTAN CAPITAL LIMITED RespondentsIN THE HIGH COURT OF JUSTICE Claim No. HC-2014-000608CHANCERY DIVISIONDERIVATIVE CLAIM
Between
NOVATRUST LIMITED Petitioner-and-KEA INVESTMENTS LIMITEDSPARTAN CAPITAL LIMITED Defendants
Elizabeth Jones QC, Justin Higgo, Gareth Tilley, Paul Adams and Oliver Jones (instructed by Farrers) for ClaimantsHannah Brown (instructed by Oury Clark) for 1 st DefendantSa’ad Hossain QC, James Goldsmith, (instructed by Wilson Gilmore) for 2 nd DefendantHearing Hearing dates: 12 th, 13 th, 16 th and 17 th January 2017
JudgmentMr Justice Nugee :Introduction
[1]This judgment deals with one outstanding matter from the last CMC in these actions, which concerns expert evidence. I will deal with the matter in very abbreviated fashion as the parties need to know where they stand. By paragraph 12 of an Order made by me on 28 April 2016 at an earlier CMC I permitted expert evidence in the shape of a “single expert in the field of equity investment in property opportunities” both in what I will call the Kea Part 7 claim and the Novatrust proceedings to address:
“(a) the value of the rights and opportunities proposed to be acquired prior to 31 May 2012; and (b) the value of the rights and opportunities under the Schedule 2 Transactions as at (a) 24 July 2012 and (b) 30 April 2013.”
That part of the Order was made without any specific argument on the point, or my having to resolve any disputed issues.[2]The Kea parties have now applied for that permission to be revoked on the basis that expert evidence was not in fact needed for the trial of either action, but it was in due course accepted that there was one issue which did justify expert evidence, and it is therefore accepted that expert evidence should be permitted to be called to address the value of the various rights and opportunities as at 24 July 2012. That is to be given effect to by adding at the end of paragraph 12(a) the words “as at 24 July 2012”; and by leaving in paragraph 12(b) insofar as it refers to the value as at 24 July 2012. But Ms Jones QC, who appears for the Kea parties, says that the reference in paragraph 12(b) to April 2013 should come out, whereas Mr Hossain QC, who appeared for Novatrust, submits that it should be left in and indeed expanded to refer to not only a specific date in April (25 April 2013) but a further date (28 October 2013).[3]The principles are not in dispute. I was helpfully referred to the recent discussion of them by Warren J in British Airways plc v Spencer [2015] EWHC 2477 (Ch) at [60]-[69], especially at [68]. I need not set out the whole passage: in effect, the approach is to determine whether expert evidence is(a) necessary to resolve an issue, or(b) of assistance to the Court in resolving that issue; and(c) if the latter, whether, striking a balance (based on proportionality), it is reasonably required to resolve the proceedings. This summary is not intended as a substitute for the fuller exploration of those principles. Mr Hossain says that the evidence, if not necessary, is likely to be of assistance to the Court in resolving both the Kea Part 7 claim and the Novatrust proceedings.[4]I will start with the question of affirmation which arises in the Kea Part 7 claim. There is an issue as to whether there was an affirmation by the Kea parties in April 2013. That is pleaded at paragraph 252 of Mr Watson’s Amended Defence as follows:
“Mr Munro, on behalf of Kea, affirmed, alternatively, ratified or adopted all agreements previously executed on behalf of Kea by Mr Dickson in relation to Project Spartan.”
[5]There is a reply to that which among other things pleads that any affirmation was procured by misrepresentations. Among the misepresentations relied on is one (paragraph 45.3) that:
“the Schedule 2 Transactions were not commercial transactions intended to be in the best interests of Spartan, but instead, as pleaded at paragraph 6.3 above, represented a device to pay money to Mr Watson’s interest to the detriment of Spartan and Kea.” (The words I have italicised are in a draft re-amended reply) Another representation relied on is (paragraph 53) that “it had been proposed at the outset that Kea would purchase 50% of the shares in Spartan at an enterprise value of £45m and that this was consistent with the Schedule 2 Transactions as presented.”
Mr Hossain submitted that evidence of the value, as at April 2013, of the Schedule 2 Transactions is likely to be of assistance in assessing the question whether such misrepresentations were made.[6]I bear in mind that so far as that is concerned(i) I am being asked to revoke the permission which has already been given, so the onus is on Ms Jones to persuade me that expert evidence is not appropriate; and(ii) that expert evidence as to value of the Schedule 2 Transactions is to be called in any event (albeit as at 24 July 2012). As with other aspects of this complex litigation, I am conscious that the Court inevitably at this stage has only a partial view of the picture and that a much fuller picture will emerge at trial. In those circumstances I approach this on the basis that unless I am confident that the expert evidence will be of no or no significant assistance, then I should be slow to revoke the permission that has already been granted.[7]I do not think I can be confident of this. Ms Jones may well be right that it turns out at trial that the value of the Schedule 2 Transactions as at April 2013 is of no real assistance to the matters that have to be resolved. But it may be that it will indeed shed light on these matters. Since the experts are to be called in any event, allowing the experts to deal with the value as at April 2013 as well as at July 2012 will not require the instruction of anyone new, or the calling of any more witnesses, but merely permit the witnesses to deal with another valuation date. That will no doubt cause some extra costs to be incurred, but the time and effort and cost involved will be nothing like as great as if it were a question of instructing and calling an entirely new witness in another discipline. In litigation of this complexity and size I do not see that that is likely to be disproportionate.[8]Having reached this conclusion, there remains the question of the use of the evidence in the Novatrust proceedings and Novatrust’s application to widen the scope of the evidence to include a valuation date in October 2013. I remain unpersuaded that evidence of the actual value of the Schedule 2 Transactions as at April or October 2013 will prove of any assistance at all in the Novatrust proceedings. The essential allegation in the Novatrust proceedings is that Harlaw did not act in what it bona fide believed to be in the interests of Spartan, and it is difficult to see how the actual value of the Schedule 2 Transactions is likely to be of assistance on that. I have struck out the Charterbridge allegation in paragraph 36(3) of the Reply (which might have formed a ground for adducing evidence of value); and I have also said that the allegation in paragraph 29(3)(b) of the schedule to the Reply, which sought to plead that the value of certain matters exceeded the price to be paid, was not relevant. What is relevant when assessing the rationality of Harlaw’s decision in deciding not to pursue a transaction (and hence whether an inference that Harlaw was acting otherwise than bona fide can be made) is not the actual value of the transaction in question but whether a director in possession of the information available to Harlaw would have appreciated that the value of the transaction greatly exceeded the purchase price: see my judgment of 17 January 2017 at [89].[9]Nevertheless, in circumstances where I propose to allow evidence to be adduced as to the value of the Schedule 2 Transactions as at April 2013 in the Kea Part 7 claim, it does not seem to me that allowing the same evidence to be relied on in the Novatrust proceedings will have any significant costs consequences at all. The evidence will be before the Court in any event as the actions are to be heard together. Once evidence is called it is in general evidence for all purposes. I do not see that any practical benefit is served by saying at this stage that evidence which will be called in the Kea Part 7 claim will not be available in the Novatrust proceedings – in practice the Court will have the evidence and will make such use of it, if any, in resolving the issues in either set of proceedings as appears appropriate. In those circumstances I propose to allow the evidence of value of the Schedule 2 Transactions as at 25 April 2013 to be relied on in the Novatrust proceedings as well as the Kea Part 7 claim.[10]That leaves the question of allowing the value also to be updated to October 2013. That I find rather less straightforward. I have already said that I remain unpersuaded that this evidence will be of any assistance, and there is bound to be some extra cost involved in updating the evidence from April to October. However given that evidence will be called of the value as at April 2013 in any event, the extra cost of updating that evidence to take account of any extra information in October is likely to be fairly limited. Novatrust assert that this question – the actual value of the Schedule 2 Transactions between April and October 2013 – forms an important part of their case, and it is possible that at trial, despite my scepticism, it will be of some assistance in assessing Harlaw’s bona fides. In those circumstances it does not seem to me disproportionate to allow evidence of value as at October 2013 to be adduced as well. If, as I suspect, it turns out at trial to have been of no assistance, then Novatrust can expect to have to bear the extra costs incurred in any event, whatever order is made as to the costs generally.[11]I will therefore permit expert evidence as sought by Novatrust.